Why SMEs Should Automate Finance Operations

Having robust financial operations is crucial to an SME’s sustainability. Particularly if it is short on working capital, smooth financial operations can make or break a company and determine if other business financing means such as business loans or microloans are necessary.

Why automate

Managing the full financial operations process enables the firm to have an overview of separate functions. All financial transactions can be standardised, and processes can be streamlined thoroughly from end to end. Automating finance operations also helps in governance and acts as an audit to oversights.

Transparency

Having software that logs payments and receivables in a recurring, fixed schedule provides assurance and manages expectations. Doing so in a transparent manner for relevant stakeholders also prevents any doubts and allows checks to be in place.

Efficiency

Any manual work performed is always subject to human error. Even a wrong decimal place or an additional digit can impact the balance sheet tremendously. According to McKinsey Global Institute, automation can up productivity globally, by up to 1.4 per cent per annum. In fact, in about 60 per cent of occupations, around a third of the constituent activities could be automated by 2030 based on current technologies. In Singapore, approximately 24 per cent of work activities may be impacted by 2030.

Likewise, automating financial operations expedite approvals and presents information with clarity in a digestible manner. Instead of having stamp approvals or e-mail confirmations, approvals can be automated or digitised. Instead of complicated spreadsheets and juggling cumbersome procedures, a comprehensive summary can be crafted.

Higher level work

By automating finance operations, time is freed for employees to engage in higher level work. Not only will the more meaningful and less tiresome work translate into a happier workforce, employees can also channel their energy into work that requires human logic and decision-making which results in increased productivity. By being engaged in work that requires higher thinking and collaboration, a healthy work culture can also be established.

Foundation setting

As a firm grows, the financial processes will grow alongside it. While mild tweaks may be necessary, the foundation underlying all financial operations would have already been in place and there is no need to start from scratch with a wealth of unorganised data.

Accurate decision-making

Knowing that the financial data is accurate allows stakeholders to be confident in making strategic directions and drafting out sales forecast models to achieve better cash flows. With lesser unknowns in finances, the management can also factor in lower buffers when designing projects for greater control.

It is important to note that sensitive data will be handled during the automation process, and that they are likely to be stored in the cloud. As such, there is a need to ensure that appropriate security measures are in place.

What to automate

Automating financial operations can benefit many teams in the company. The finance, accounting, internal audit, procurement, administrative, and legal team can all stand to reap rewards from it. According to McKinsey & Company, general accounting operations are the easiest to automate, with 77% of it being fully automatable. Cash disbursement, revenue management, financial control, external report, tax, and risk management are also areas to consider. Here is an non-exhaustive list of financial processes that can be automated.

Invoice processing

Without automation, employees may mismatch invoices or make errors when bookkeeping. This can result in lost revenue, unaccounted assets, and frustrated clients. The easiest to automate, manual invoice processing is an administratively cumbersome task that involves translating information from paper to an online system. As such, recurring payments, periodic billings and other accounting procedures can be automated. Money is received more promptly, delays are prevented, and insights on turnaround time can be generated through comprehensive dashboards and reports. To get paid faster, try following a 10 step invoice checklist or simplify the accounting system.

Purchase order (PO)

Software as a Service (SaaS) solutions can help automate POs. PO initiators and generators in the firm can do so remotely, even when they are not in office. This is perfect for employees who are often on business trips, have flexible working hours, or are perpetually in the client’s office. Not only are bottlenecks removed, past information on costs is also tracked online to facilitate comparisons across the same vendor, and across its competitors. For instance, firms who are looking at hiring an agency to translate a press release can compare the same agency’s quotations across a five year period, and even look at a list of close competitors to get a more cost effective quote.

Budget approvals

Budget approvals typically have multiple layers of approval, often times across various business units. A lot of delays and chaser calls are expected, and the whole process can be halted if an approver is busy or away. This is compounded as approving budgets are typically not on top of the approver’s priority list, and may not even be directly relevant to his job.

Injecting guidelines to automate approvals can help speed up this process immensely. If the budget in question meets a set of pre-determined criteria, it can skip certain layers of approval, and be automatically routed to the right approvers.

Travel or training approval

Prior to a business trip or training, employees need to input the agenda and justify a projected expenditure. This approval process then trickles down to their reporting manager, the department manager, and typically a human resource manager to ensure that there is no overspending. For instance, for flights to Thailand, Thai Airways may be the company’s preferred airline as opposed to Singapore Airlines. There can also be rules in place to ensure that flights are booked at least 3 weeks in advance for cost savings, and anything beyond the time frame will require justification and be routed to more layers of approval.

Expense

Local taxi costs, asset purchases such as laptop or printer replacements and entertainment expenditure are all expenses that the company has to make. By having an official spending policy and guideline, employees will be better informed of how to act. For instance, a cap in entertainment expenses made through either the employee’s personal credit card or the corporate card can be in place. If the employee spends above the limit, justifications will have to be provided and the spending will need to be approved on a case by case basis.

Through automating and digitising this information, firms can also analyse spending habits of different individuals and business units across different periods to identify where cuts are necessary.

How to automate

Automating financial operations may not be as expensive as imagined. It can be outsourced to vendors providing such modern services. Firms can reach out to vendors for quotations and invite them to the company for a detailed explanation. As the sector is consistently growing, be prepared to do ample research to get the most bang out of your buck.

Process Maps

Financial flows can be made clear by crafting a detailed process map explaining the ins and outs of how it works. The key people in charge should also be highlighted here.

Workflows

With the process map as a guide, workflow can be generated and discussed with stakeholders. The parties can then decide which portions can be either fully or partially automated.

Monitoring

It is crucial to check on the automated workflow, particularly when it is newly set up. This way, errors can be rectified to ensure accuracy.

Tweaks

After analysing the performance of the automated system, make tweaks wherever necessary. Perhaps there are areas in which laggings happens, or a step in the workflow may be unnecessary. After making these improvements, the automated system will be more robust and helpful.


Automating finance operations allows for a more accessible and friction-free experience, and is often a necessity in today’s digitised world.

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